"Physical" for the purposes of this argument should be defined as something that is tangible; something that you can pick up and show to someone, not an electron. Discussions like this aren't meaningful unless you're in law school or something.

"The mass of men lead lives of quiet desperation." -Henry David Thoreau

Your wallet has the encryption keys. The blockchain has the addresses, and everyone mining bitcoins has information on every bitcoin transaction through the blockchain. That's how a transaction is verified as legitimate.

"The mass of men lead lives of quiet desperation." -Henry David Thoreau